In recent years, financial institutions (FIs) have become accustomed to the idea of outsourcing aspects of their operations through cloud computing partnerships in order to increase efficiency, reduce costs and make their offerings more attractive to consumers. While the benefits of outsourcing certain functions are generally understood throughout the industry, there are still certain parts of an FI s operations that are managed internally and require significant capital investment and resources. The purchase and management of software across an organization has fallen into this category, requiring investment not only in the software itself, but in the hardware and personnel required to host and maintain it a problem for both large FIs with extensive software needs and small FIs with limited information technology (IT) resources. Thanks to advances in cloud computing, however, new opportunities are emerging for FIs to shed some of the cost and burden related to software integration and to realize a multitude of benefits in doing so. As defined by the National Institute of Standards and Technology, cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. [1] Cloud computing allows organizations or consumers to draw upon remotely located and managed computing resources to store and access data or applications quickly and effortlessly without needing the files to be physically present on the device accessing the files. Cloud computing is widely embraced by consumers around the world as a way to easily access, manage and update data and applications across a variety of devices. The field is growing rapidly. According to International Data Corporation research, worldwide revenue from public IT cloud services exceeded $21.5 billion in 2010 and will reach $72.9 billion in 2015, representing a compound annual growth rate of 27.6 percent more than four times the projected growth for the worldwide IT market as a whole, or 6.7 percent. [2] Cloud computing technology is having a huge impact within the consumer sphere. What does this technology mean for FIs? This white paper will explore: 2 The Platform-as-a- 3Benefits of a Service Model Cloud-Based Software Model 1 4 The Software-as-a- The process of Service Model choosing a partner 2
Software as a Service: Simplifying Software Deployment and Management for FIs Since the introduction of software for the financial services industry, FIs have had to purchase and install software individually for every workstation, ATM, self-service kiosk and so on, within their organization. Updates or troubleshooting software has had to be performed manually at every endpoint, with a significant amount of capital invested in upgrading to new software versions every few years to stay current with consumer demands. In some cases, managed service contracts with software providers have meant that FIs do not have to handle all of these functions, though even in these situations, site visits are often required for software services to be provided. Cloud-based SaaS technology is causing this to change. In the SaaS model, FIs subscribe to software that is provided as a cloud service model instead of purchasing the software outright. Software is hosted remotely and is part of a cloud-based architecture accessible through a network connection. By utilizing software via the SaaS model, FIs avoid paying up-front licensing fees, and have little to no involvement in the management or hosting of software because it is done automatically as part of the SaaS offering. In the SaaS model, FIs subscribe to software as a cloud service model instead of purchasing the software outright. 3
PLATFORM as a Service: Putting Cloud-Based Application Development in the Hands of FIs Beyond subscribing to SaaS offerings, FIs can also benefit from cloud computing technology by seizing upon a new opportunity to engineer their own cloud-based software and tailoring applications to fit their precise needs through the Platform as a Service (PaaS) model of software development. PaaS customers make use of programming languages, application development tools and computing infrastructure provided via a community development platform to create, modify and host their own applications in an easily accessible cloud environment. FIs that use this development platform do not manage or control the underlying cloud infrastructure, but have control over the applications they create and may control the configuration settings for the applicationhosting environment. FIs can choose to create their own applications or expand upon existing cloud-based software offerings, acting as developers, testers and administrators for consumer-facing or internal applications. As is the case with SaaS offerings, there is no need to install, upgrade or host software with the PaaS model. For small FIs that do not have the IT resources to easily create their own cloud-based applications and large FIs that want the capability to efficiently modify and quickly deploy applications, PaaS offerings fulfill needs without requiring substantial capital investments. PaaS customers make use of programming languages, application development tools and computing infrastructure provided via a community development platform to create, modify and host their own applications in an easily accessible cloud environment. 4
WhITe PAPer SOFTWAre SOLUTIONS BeNeFITS OF A CLOUD-BASeD SOFTWAre MODeL FIs that understand and embrace the cloud computing model stand to realize significant benefits, as this software delivery and management model has the potential to impact a variety of channels, including the branch, self-service, online and mobile. FASTER >> Reduced time to market Since software provided via a cloud computing model does not need to be physically installed on individual pieces of hardware, there are no delays in software rollouts related to implementation, configuration or upgrades. This is especially useful in the self-service channel, where software on ATMs located across a wide geographic area can be quickly and simultaneously updated with new features without requiring service visits or notable terminal downtime. COST-EFFECTIVE >> Lower capital and operating expenditures When software is being delivered via a cloud-based model, FIs do not need to invest in buying or maintaining expensive, high-tech computing infrastructure because software is hosted within provider data centers. As a result, operating costs for FIs can be greatly diminished. These cloud services partnerships work much like a relationship with a utility company an FI pays for what they are using, not the infrastructure or personnel to support it. MANAGEABLE >> Streamlined implementation, configuration and upgrades With most cloud computing delivery models, cloud service model providers handle the implementation, configuration and upgrading of software to relieve pressure on an FI s IT personnel. This ensures that the latest software is deployed as available, efficiently and in a timely manner, across platforms by professionals who are already familiar with the software the FI needs only to determine how to best utilize applications in a manner that suits their organization. SECURE >> Security Any cloud computing service provider s security expertise should weigh heavily into any FI s decision regarding partnerships. Certain software service providers have technicians designating 100 percent of their time to maintaining and securing all cloud service, and they may have experience maintaining the security of dozens, if not hundreds, of companies data. As a result, cloud service providers may be better equipped to keep financial data safe than FIs themselves. CUSTOMIZABLE >> Customizability While cloud computing service providers can greatly streamline the management of an FI s software as part of a service agreement, the FI still retains operational responsibility and control. Software attained through a cloud-based delivery model can be customized to fit FI branding and functionality requirements, making it easy to integrate on an application, client and solution level. FIs also have the flexibility to change course quickly through SaaS engagements, as they can subscribe to any application at any time. RESILIENT >> Improved disaster recovery Since data and software reside on remote servers and not just local hardware in a cloud-computing setup, fast recovery is possible in the event of software failure or an IT disaster. Traditionally, if software malfunctioned on an ATM, a service call would need to be made to locate and address a problem. When software is being delivered directly from a remote data center, a cloud service provider can detect issues and restore the service back to a state of full functionality in a matter of minutes, not hours. FLEXIBLE >> Flexible pricing models FIs accessing software through a cloud computing model have more expenditure options, such as paying a predictable monthly subscription fee or being billed according to which software tools the FI is using, the amount of computing resources being consumed or the number of platform users. Terms can be negotiated between an FI and software provider to suit the needs and scale of the FI, sometimes allowing the FI access to advanced technology that would have previously been unaffordable. RELIABLE >> Higher reliability and availability operations Constant monitoring of cloud-based software by a software solutions partner means that any technical issues can be quickly recognized and addressed. Trained IT professionals at a service provider s data center are tasked with maintaining the integrity and efficiency of software operations, allowing FI-employed IT personnel to work more efficiently by focusing attention elsewhere. Fast, reliable data transfers to and from data centers with robustly designed and maintained infrastructure also make sure consumers are receiving continuous, dependable service. >> Advanced metrics Software-focused cloud service providers have the ability to gather and analyze usage data, providing an FI with statistics on which software functions are most frequently used and by whom. In a self-service environment, this means an FI has access to comprehensive data on the type of transactions users are carrying out, and how frequently. Armed with this information, FIs can more easily calculate roi and tailor user experiences. SCALABLE >> Convenient scalability Financial software has traditionally been created to meet the high-volume requirements of large institutions, meaning smaller FIs may pay for more advanced software than they require. With a cloud-based service model, FIs can now approach software functionality from a self-service perspective, investing only in the functionality they need, saving on software costs. MEASURABLE 5
Security and cloud computing While there are a host of benefits to be gained by FIs embracing cloud computing technology, it is important to note that not every cloud services provider is a good match for your institution. Make sure your cloud computing partner has the capabilities to meet your requirements based on the data you plan to transmit and store. There are multiple types of cloud computing models that technology companies offer, including public cloud architectures that house data and operations of the members of the general public, community clouds meant for members of a specific industry and private clouds meant for a single institution. Each model has different advantages, as well as drawbacks, from a security perspective, so be sure to talk through your needs with a provider up-front. Given the importance of the accessibility and security of financial data, FIs should seek cloud computing engagements only with providers that are intimately familiar with the specific and ever-evolving security requirements inherent to the financial services industry. Also, a provider should be able to assure an FI that it is in compliance with all regulations governing data security, should receive periodic audits from reliable third parties and should offer a means for your institution to assess information regarding whether or not your requirements are continually being met. In essence, a cloud-based computing model should provide expanded possibilities for your company, but should not add undue risk. In essence, a cloud-based computing model should provide expanded possibilities for your company, but should not add undue risk. Technology and Cloud Computing: The Way of Tomorrow As consumer cloud computing technology continues to evolve and it is likely, as researchers estimate, that by 2015, one of every seven dollars spent on packaged software, server and storage offerings will be through the public cloud model cloud computing technology will likely become increasingly integrated into the financial services industry. [3] Beyond SaaS and PaaS offerings, the impact of cloud computing is already being seen in other innovations throughout the industry, such as virtualized ATM infrastructure that allows for the removal of an ATM s business software and the handling of all transaction processing via remote computing resources. High-speed 4G LTE technology is also being integrated into the self-service channel, opening up new possibilities to add more services faster, through a larger connection. Adoption of the latest cloud-based technology does not have to happen all at once. For FIs looking to gradually begin integrating the cloud into their operations, the SaaS model offers a starting point that requires minimal up-front investment, and the PaaS model offers the flexibility to invest only in the functionality consumers and employees need. Cloud computing offers real promise for improving operational efficiency, growth and retention and customer experience. FIs need to be selective in their choice of partners, relying only on organizations that can serve as a single-point-of-contact for all of their service, security and technology needs. 6
END NOTES [1] The NIST Definition of Cloud Computing, National Institution of Standards and Technology, U.S. Department of Commerce, Special Publication 800-145 (September 2011). [2][3] Public IT Cloud Services Spending to Reach $72.9 Billion in 2015, Capturing Nearly Half of Net New Spending Growth in Five Key Product Segments, According to IDC. International Data Corporation. 2011. Call on Diebold for the latest in product, service and security solutions. Since 1859, Diebold has put the customer first. Contact Information: Diebold, Incorporated P.O. Box 3077 Dept. 9-B-16 North Canton, Ohio 44720-8077 800.999.3600 USA 330.490.4000 International email: productinfo@diebold.com www.diebold.com Diebold, Incorporated 2012. All rights reserved. File No. 98-248